IntercontinentalExchange has announced it has agreed to acquire the iconic US bourse NYSE Euronext, in a deal that would create one of the largest global exchange groups.

The Atlanta-based Ice, which is best known as a commodities marketplace, announced a cash-and-stock-deal before the US market open today which valued NYSE Euronext at $33.12 a share, or $8.2bn.

In a statement, Ice said the merger would create "a premier global exchange" covering markets across "agricultural and energy commodities, credit derivatives, equities and equity derivatives, foreign exchange and interest rates". The deal is expected to close in the second half 2013, subject to regulatory approvals in Europe and the US and approval by shareholders of both companies.

The deal mirrors Ice's joint $11.3bn counterbid with Nasdaq OMX last year to purchase NYSE Euronext, in an attempt to scupper NYSE’s deal with German operator Deutsche Börse. Ice would have acquired its rival's derivatives assets as part of the deal, including Liffe, while Nasdaq would have taken on NYSE Euronext's equities business. However, the deal was scrapped on competition grounds following discussions with the antitrust division of the US Department of Justice.

Here we ask 10 key questions raised by the merger.

Why is Ice buying NYSE Euronext?

It’s the derivatives, stupid. Ice chairman and chief executive Jeff Sprecher has long coveted a major European financial futures business to complement Ice’s highly profitable energy franchise, Ice Futures Europe. Liffe, NYSE’s London-based futures franchise, dominates trading in commodities and short-dated European interest rates. Peter Lenardos, an analyst with RBC Capital Markets, said a combined entity would also be able to compete more effectively with futures behemoth CME Group in both trading and clearing of OTC products. Ice said today that it is “committed to maintaining the position of NYSE Liffe in London as a leading international market operator for derivatives products”.

What is in it for NYSE?

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The advantages for NYSE from a derivatives and clearing point of view are potentially huge: Ice has a ready-made derivatives clearinghouse in London, with support from major dealers and clearing brokers – many of whom are shareholders in Ice. The combined entity would dominate European energy, commodity and short-dated fixed-income trading, as well as OTC credit clearing. Distribution of its fledgling NYSE Liffe US business, including its growing fixed income franchise, would increase markedly with Ice’s backing.

Where does clearing fit into the deal?

Clearing has become central to both exchanges' strategies amid new US and European regulations which will force standardised over-the-counter derivatives through clearing houses. Ice Clear Europe is a well-established European listed futures clearing franchise which is also dominant in the OTC credit default swap market with plans to expand into foreign exchange and OTC energy. NYSE, meanwhile, is building a new London-based clearing offering for listed and OTC derivatives in a bid to capitalise on opportunities created by the new rules.

The deal with Ice is a nice post-trade fit that would see NYSE drop the project – which is due to cost around $85m – and migrate its clearing into Ice Clear Europe. This arrangement would likely be attractive to NYSE’s clients, many of whom are already members of Ice Clear and are already invested in its default fund.

What is the future of NYSE's equities and listings businesses?

Ice said today that it is committed to preserving the NYSE Euronext brand and that it plans to maintain dual headquarters in Atlanta and New York, which suggests the Big Board and US equities trading are safe.

Europe, however, is another matter. The exchanges said that they would explore spinning off NYSE’s Euronext markets of Paris, Amsterdam, Brussels and Lisbon into a separate listed entity, “if market conditions and European policy makers support the offering”. This suggests the future of the European equities business remains uncertain and other players may yet enter into the mix.

Nasdaq OMX has long-struggled to develop a pan-European franchise, which would make the Euronext markets an attractive complement to its Nordic and Baltic equities offering. The other major contender for the European equities business would be Deutsche Börse, whose own franchise is focused almost exclusively on German stocks. The German exchange group has aspirations to expand its existing cash equities offering and grab some of the retail market. Snapping up the Euronext markets would achieve this nicely.

And what about the future of NYSE's IT and technology business?

Technology was conspicuously absent from today’s announcement.

NYSE’s IT and technology franchise is the smallest of the group’s three divisions, but one which it has had grand ambitions for. Earlier this year, NYSE chief executive Duncan Niederauer said the exchange aimed to more than double the revenues it generates from technology sales, to reach $1bn by 2015, and had targeted double-digit revenue growth this year. However, the division has failed to deliver this year and those targets have already been revised down, according to analysts. In the first nine months of this year, NYSE’s revenues from IT were down 3% to $353m, according to its financial reports.

It is unclear how the division would fit within the Ice group, since Sprecher has built up the exchange based on a strong suite of proprietary technology products, including internet-based platforms.

Would the deal get regulatory approval?

The companies said today the deal is expected to close in the second half, subject to regulatory approvals. Since Ice has no existing interest in US cash trading and the combined group’s futures market operations would have a market share of 10%, it is very unlikely the Department of Justice will oppose the deal.

The scrutiny this time round will come much more from European competition authorities, principally DG Markt and the UK’s Office of Fair Trading. Critics may argue that the deal could have serious implications for start-ups looking to compete in derivatives trading or clearing, but the European derivatives businesses of Ice and Liffe do not compete. Lenardos said: "We do not foresee anti-trust risk as there is no significant business overlap.”

Is Ice paying the right price?

The transaction is currently valued at $33.12 per NYSE Euronext share, or a total of approximately $8.2bn, based on the closing price of Ice’s stock yesterday. At an implied value of 13-times earnings – and a 37.7% premium to NYSE’s closing price yesterday – the deal looks expensive, according to RBC’s Lenardos, writing before the deal was announced. “$10bn is a steep price for Ice to gain meaningful access to European derivatives,” he wrote. But Alex Kramm, an analyst at UBS, also commenting before the deal was announced, said it still had the potential to be “strongly accretive” for Ice’s earnings, in particular from derivatives trading and clearing revenues. The companies said today run-rate expense synergies of $450m are expected to be achieved in the second full year post-closing.

What is the likelihood of counter bids?

As displayed during the wave of mega exchange mergers last year, a big deal often prompts an aggressive wave of counter-bids by rivals keen not to miss the party. In addition to the joint Ice-Nasdaq bid for NYSE Euronext, the London Stock Exchange was ultimately thwarted in its bid to buy Canadian counterpart TMX Group by a group of local institutions called the Maple Group. In the instance of this deal, the only major US and European exchanges with the firepower to put in rival bids are likely to be CME Group and Deutsche Börse. However, the German giant’s bid to acquire NYSE Euronext has already faltered once before, based on competition concerns in the European listed derivatives market. Meanwhile, according to Richard Perrott, “CME is focusing on organic growth, and probably would not be interested in NYSE Euronext’s non-derivatives businesses. It is difficult to see anyone else looking to outbid Ice”.

What does it mean for the rest of the market?

The bourses’ claim that a combined entity will create an “unparalleled” operator of global exchanges and, crucially, clearinghouses is not a hollow boast.

Regulations coming into force over the next two years will put tens of trillions worth of derivatives through clearinghouses. Those who can clear OTC derivatives alongside listed products are expected to be the biggest winners. That puts Ice squarely on a collision course with US behemoth CME Group, which controls 90% of the US futures market, and is already a major OTC clearer. The new group will be much better able to compete with the CME Group, according to analysts.

In Europe, Ice already competes with Deutsche Börse’s Eurex Clearing in credit derivatives clearing. The possible future addition of an OTC rates clearing business in time to complement Liffe’s rate futures franchise could bring it into competition with both Eurex Clearing and LCH.Clearnet. Offering Liffe a ready-made clearing house could also rejuvenate its franchise and give it greater control over product development, at a time when up-start rivals are looking to build products that compete with its core rate futures.

The CME declined to comment on the implications of the deal.

What happens to the executives?

Sprecher’s power base will remain absolute as chairman and chief executive of the combined group. Niederauer will be president of the group, and chief executive of the NYSE division.

Financial News understands that no decision has been made with regard to headcount in Europe. NYSE has already seen a number of senior executives depart this year, including global head of derivatives Garry Jones.